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Corporation is considering the purchase of a new machine

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Reference no: EM131802012

The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment:

Year

Income from
Operations

Net Cash
Flow

1

$18,750

$93,750

2

18,750

93,750

3

18,750

93,750

4

18,750

93,750

5

18,750

93,750

The average rate of return for this investment is
a. 5%
b. 15%
c. 10%
d. 25%

Reference no: EM131802012

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